The man charged with making sure banks comply with a $25 billion mortgage settlement has a website, one employee and subleased space in a Raleigh, North Carolina, office tower.
But after a judge's approval of the pact last week, Joe Smith said on Monday he will move quickly to add staff, hire professional firms and make preparations for issuing reports on how banks are meeting new standards for working with borrowers.
Federal officials and attorneys general from 49 states reached the settlement with five lenders in February to resolve foreclosure abuse allegations.
The bulk of the settlement with Bank of America Corp , Wells Fargo & Co , JPMorgan Chase & Co , Citigroup Inc and Ally Financial will come in the form of up to $17 billion in loan modifications for distressed borrowers, but the pact also requires lenders to meet new mortgage servicing standards going forward.
Smith was North Carolina's banking commissioner from 2002 until February, when he resigned to become the settlement's monitor. He was recruited by the attorneys general ofNorth Carolina and Iowa, who helped spearhead more than a year of negotiations with the five lenders.
"I'm under no illusion that this will solve all the problems, but I do think this will help us get to a better mortgage industry," Smith said.
Smith held a group meeting with the five lenders in Charlotte, North Carolina in March and a one-on-one session with officials from Ally Financial last week in Raleigh. He plans to meet with the other banks individually by early May.
Smith will begin reviewing data submitted by the banks this year and issue his first report on their performance early next year. The banks are required to report their compliance with servicing standards for foreclosures, loan modifications and other dealings with borrowers. They will also have to disclose how many borrowers they have assisted through consumer relief programs.
If banks are found to be making errors above certain thresholds, they will be given a chance to fix the violations. But the settlement does have some enforcement teeth. The agreement's monitoring committee of state and federal officials can seek civil penalties of up to $1 million for first-time violations and up to $5 million for additional ones.
Some critics have said the settlement gives the banks too much leeway, including error rates of up to 5 percent on loan modifications. Smith said his office will aim to do better than the minimum and pointed out that the settlement doesn't preclude private consumer complaints.
The Office of Mortgage Settlement Oversight has a $3.75 million budget through June 30 funded by the five servicers. After that, Smith will prepare annual fiscal-year budgets, also to be funded by the banks. Smith's annual salary is $375,000.
So far, he has hired a treasurer/controller, but isn't sure how big of a staff he will eventually have. He plans to use outside law firms, accounting firms and other contractors for some of the work.
The job is expected to last four years, including the time to prepare the office's final report. Since leaving his bank commissioner post, Smith has also joined the Raleigh law firm of Poyner & Spruill, but he expects most of his time will be spent as monitor. The settlement agreement says the monitor cannot go to work for any party to the agreement for two years after leaving.
The office's current website - https://mortgageoversight.com - provides basic information about the monitor's role, but Smith plans to add more for consumers, including ways for them to submit information and interact with his staff. His office will be a nonprofit that files public financial statements. Monitor reports will also be public, although some material may be kept confidential, including information considered proprietary to the banks.
Banks involved in the settlement also say they have started preparations for providing expanded loan modifications and refinancings required under the settlement.
Wells Fargo, the largest U.S. mortgage servicer, said starting Monday it will mail letters to customers who qualify for a refinancing under its expanded programs. Options for other customers will become available in coming months.
Bank of America said it has started reaching out to customers already in the loan modification process about its principal reduction program. This month, it will start contacting more than 200,000 customers identified as being eligible for the program. It is still finalizing plans for its refinancing program.
JPMorgan Chase has started reviewing customer eligibility for principal reduction and this month plans to contact customers about refinancings. Citigroup and Ally also said they have started implementing the settlement.